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Where Taxpayers and Advisers Meet

Drawing a dividend

Jmctsa
Posts:1
Joined:Sat Feb 08, 2020 4:43 pm
Drawing a dividend

Postby Jmctsa » Sat Feb 08, 2020 4:48 pm

I have a Ltd company. I am the only director.
The company provides security services.
In Oct 2018 I decided to invest in a takeaway business. (I have previous experience in catering). I used money from my company to fund the takeaway business. The takeaway never really got going and made losses. I closed it after 6 months.
When I recently filed my tax return for 18/19 my accountant told me that because the takeaway was a different type of business I should have opened a new company. He informed me that all the money I had used would now be classed as a directors loan. The amount of the loan is 27000.
Between the security income and the money spent trying to make the takeaway work I have not made any profit.
My accountant has suggested paying back the loan (this is impossible) or raising a dividend of 17400. How do I do this? And how does this help? And how long do I have to do this?
The company also has a debt to a lender of 5500.
Thanks in advance for your advice.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Drawing a dividend

Postby AGoodman » Mon Feb 10, 2020 3:24 pm

It's not so much that it was a different type of business (a company is not limited to one trade), it's because you presumably took the money out of the company. ie. you made the investment personally in some way, either by entering into a tenancy agreement or some form of investment agreement with other investors/owners.

It has to come out as a loan or dividend (as you accountant says) and if you can't repay, makes sense to treat it as a dividend. As sole director/shareholder, I suspect you can just decide to pay yourself a dividend in that amount and tell your accountant.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Drawing a dividend

Postby pawncob » Mon Feb 10, 2020 5:05 pm

But please ensure that all technicalities relating to the dividend are observed, or it won't be legal.
With a pinch of salt take what I say, but don't exceed your RDA

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Drawing a dividend

Postby robbob » Mon Feb 10, 2020 5:12 pm

In Oct 2018 I decided to invest in a takeaway business. (I have previous experience in catering). I used money from my company to fund the takeaway business.
What is the legal status of that busines - is that limited company / partnership / you as sole trader or someone else as a sole trader?

When you say
I decided to invest
do you mean you as you the individual or you as in your existing company would be investing?

You want to be clear and explicit with everything you say and do in reagrd to things like this otherwise others (eg your accountant) may get the wrong end of the stick.

Eg if it was a loan you from your company to a different company you don't want to tell everyone that it was a loan from you as an individual to this third party company.


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